Economy

Everybody knows that oil is all about money for the companies, the contractors, the government, the speculators rushing to buy up land in Bunyoro . . . But if we re-phrase that thought as “It’s all about economics” it suddenly seems complicated and remote—something that non-economists struggle to understand. Yet, with parliament currently considering a Public Finance Bill that will make key decisions on oil revenue management, much wider public debate is needed over how Uganda’s share of the money should be spent and invested. The 3rd issue of Oil in Uganda’s quarterly, print newsletter, which is now rolling off the presses, tries to demystify the economics as a contribution to the debate. Here we re-publish one of the main articles from the newsletter, UGANDA’S OIL REVENUES: TEN KEY QUESTIONS Read More

Uganda should move carefully and without haste to develop its oil industry and wider economy. Well crafted laws, with institutional checks and balances, are essential to govern the commercial aspects. Revenues should be deposited overseas in hard currency accounts, with a portion saved for the future—because development cannot take place overnight, it needs to phased. Increased government spending should be tied to a comprehensive development plan. Environmental, health and safety issues should be governed by regional laws that bind international oil companies to the same standards they would have to apply in their countries of incorporation—because otherwise they ‘won’t take it seriously.’

So says Columbia University professor, scholar-activist and renowned extractives industries expert, Jenik Radon, who has been delivering a series of lectures at Makerere University. Oil in Uganda caught up with him as he packed his bags to return to storm-buffeted New York City. Read More

More than a million tourists visited Uganda in 2011, bringing US$ 805 million in foreign exchange—the country’s biggest forex earner by a large margin. The Lonely Planet travel guide company has since named Uganda “top tourist destination for 2012.” But what has been the impact of the 16 oil exploration wells drilled inside Murchison Falls National Park, one of the main tourist attractions? What is happening to the animals that the tourists flock to see? Oil in Uganda visited Murchison to ask park staff and neighbouring communities, and also contacted tour operators who expressed concern for the future of their trade as the oil industry ramps up for production. Read More

Ezra Suruma, a former Minister of Finance, appeals for universal medical insurance and retirement pensions

Uganda should deploy oil revenues to create universal old age pensions and universal health insurance to make a more humane society. This would be a real investment in the future of the nation. So says Dr. Ezra Suruma, Uganda’s former Minister of Finance, in this exclusive interview with Oil in Uganda. He accepts that it will be prudent to place some of the revenues in an Investment Fund—because too much money flowing too fast into the general budget would be difficult to absorb. But, he argues, all Ugandan citizens should become individual shareholders in the Investment Fund, in order to ensure that each and every citizen benefits directly through annual dividends—and also to create citizen-shareholder pressure for transparent and corruption-free management of the funds. Read More

Farmers in oil-rich Hoima District were keen to sell produce to the camps accommodating oil workers in the district, but didn’t know how—and for several years the camps sourced their food from Kampala or even overseas. Now, with the camps set to expand as Uganda moves towards oil production, the door has been prised open by Traidlinks, a non-profit organisation backed by some of Ireland’s leading businesses, including Tullow Oil. Chantal Sirisena reports.

HOIMA DISTRICT: “Accessing the new market was difficult,” says Paul Kasaija, a farmer in Hoima. “We were asking ourselves – why can’t we supply [the oil camps]? Why does produce have to come from South Africa and elsewhere?”

Ezra Suruma, a former Minister of Finance, appeals for universal medical insurance and retirement pensions

Uganda’s former Minister of Finance, Dr. Ezra Suruma, has expressed doubt that the government will have the capacity to appropriately utilise expected oil revenues, given problems of corruption, weak budgertary control and lack of ability to absorb an injection of cash.

“I must say that oil frightens me as a possible source of instability if it is not carefully managed. We have had severe political instability since independence. Some of us who still carry or bear the scars of that instability are careful when looking at these issues to ensure that this instability does not come back,” he told a conference attended by several hundred people including government ministers, Members of Parliament, diplomats, civil servants, industrialists and civil society representatives at the Serena Hotel last Thursday. Read More

Uganda will start producing oil in two years time, while a ‘mini-refinery’ will be operational by 2017 according to the Commissioner of the Petroleum Exploration and Production Department (PEPD), Ernest Rubondo.

“We shall start at low levels of production—three to five thousand barrels of oil per day which will be used for thermal generation. In four years time, we shall have a small refinery of 20,000 barrels per day [bpd], which will be upgraded to 60,000 bpd in five years time, and expanded to 120,000 bpd in eight years time.”

Mr. Rubondo was responding to a passionate plea from the President of Tullow Oil in Uganda, Elly Karuhanga, who said that the oil companies and their partners were increasingly frustrated by the delay in commencement of production. He claimed that some of the service providers who invested heavily, in anticipation of early production, are now nearing bankruptcy. Read More

If you thought Uganda’s fledgling oil industry was all about Tullow, Total and CNOOC, think again. Those companies own rights to explore for and extract the resources, but their operations depend on an army of contractors. Some specialist contractors—such as Halliburton, Baker Hughes, Schlumberger or Saipem—are huge corporations in their own right, with multi-billion dollar annual turnovers. Others are more modest, locally grown enterprises. Contractors do everything from supplying, transporting and operating the drilling rigs, mixing chemical lubricants and sealants to pour down the holes, building pipelines and refineries (if Uganda ever gets round to that), insuring the operations against environmental and/or legal catastrophe . . . right down to laundering the oilmen’s clothes and making their lunches.

Chantal SirisenaandAllan Ssempebwaspent the month of August exploring this wider sector. Recently published, in our OIL PLAYERS|OIL INDUSTRY section, are their results: profiles of 23 oil industry contractors, great and small, headquartered in Milan, London, Houston, Cracow or Kampala, doing business in Uganda. Below, the authors summarise and reflect on their findings.

Visiting Ghana, a historic seed-bed of pan-Africanism, Oil in Uganda staff writer, Chris Musiime, found strong support for President Yoweri Museveni’s determination to establish a Ugandan oil refinery, in an effort to break the raw material export mould that has characterised—many would say, trapped—African economies since independence.

Ghana’s Tema Oil Refinery: expensive and inefficient, critics say, but the Government of Ghana appears committed to keeping it going.

Some key figures in Ghana are urging Uganda to set up its own oil refinery, so as to reap maximum benefits from the country’s oil resources—even though Ghana’s own refinery experience has proved costly and contentious.

Hon. Kwabena Appiah-Pinkrah, the Member of Parliament from Akrofuomi in the gold-rich Ashanti Region, points out that for the entire Ugandan population to benefit, there must be value-addition to the crude oil from within Uganda. Read More

In a fifth report from Ghana, Oil in Uganda staff writer, Chris Musiime, describes the country’s efforts to institutionalise transparency in the handling of revenues from oil and mining industries.

Mismanagement of revenues from the extraction of natural resources is widely cited as a major factor leading to the much-feared “resource curse”—the paradox that countries with an abundance of natural resources tend to have slower economic growth and, in many cases, more instability, than their less endowed counterparts.